Lots of folks have been asking about Dave Forest’s ad for Brandt Oil, which is apparently in every email inbox in the land this week… the ad is for Casey’s International Speculator, which is apparently helmed by Forest now, and for which they’d like to receive $1,995 from you for a year’s subscription (no refunds, as seems to be the case with most of the “premium priced” letters these days).
It’s the ultimate in foolishness to spend $2,000 to learn about a hot stock tip, of course — that predisposes you to actually believe the hype in the ad, and you’re committing to a long-term advisory service on the basis of one over-inflated idea. So go ahead and subscribe to Forest’s letter if that’s the kind of thing you like, and if your portfolio’s big enough to justify a $2,000 annual payment to get advice on one small portion of that portfolio (assuming, of course, that you only allocate a small part of your portfolio to speculative natural resources stocks)… but let us dig into the ad for you first, explain what this “Brandt Oil” is, and get you the name of the stock. That way, at least, you can think for yourself a bit.
Here’s a bit of the ad that entices us:
“Trump’s Executive Order Unleashes Nationwide Hunt for “Brandt Oil”
“New oil grade—set to replace Brent Crude—has already shown investors returns of 3,750%, 1,600%, 4,628% and 2,343%
“An estimated $1.03 billion reserve of this new fuel is the first and only U.S. deposit with near-term production… and 100% owned by a tiny $2 company.”
This argument is all built on an executive order that President Trump apparently signed over the winter…
“President Trump quietly signed what may go down in the financial books as his most significant executive order.
“It states that within 180 days (which started on February 16th, 2018), the Department of the Interior… along with the U.S. Geological Survey…
“Must submit to the White House, a plan to improve the most advanced topographic, geologic, and geophysical data for the entire United States (excluding only national security locations like Area 51, military bases etc).Are you getting our free Daily Update
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“The ultimate goal…?
“To identify and unlock over 1 million tons of a new “super-fuel” and other mineral resources on U.S. soil.”
That’s true, though a plan to improve the US understanding of a bunch of strategic minerals is not exactly a new thing — the government has gone through waves of caring deeply about this kind of stuff before, from uranium and rare earth minerals to regular old crude oil, and while the current interior department is more likely to spend money on helping these resources to get identified, and perhaps less likely to be an impediment to mining operations in environmentally sensitive areas, this does not necessarily mean that we’ll be bulldozing all the national parks to find more “Brandt Oil” starting on August 18. Here’s the Federal Register notice about that Executive Order, by the way, if you’d like to see the plain info.
More from the ad:
“America could soon switch to a new, more advanced higher grade of fuel.
“We call it “Brandt Oil,” and it’s quickly becoming the new standard for fuel.
“And while “Brandt Oil” is NOT a hydrocarbon or a direct fuel source like gasoline or coal, it can help power everything we use—cars, homes, buildings and machinery…
“…Without any form of pollution, global warming emissions or noise. Plus, it creates no spilling hazards.”
Sounds miraculous, eh? A miracle fuel that doesn’t pollute? Whatever could it be?
(Yes, I hear you sniggering in the back of the room… cut it out! Please wait for the rest of the class to catch up.)
It gets even more science-fiction-y as we go…
“Less than the equivalent of two gallons’ worth of “Brandt Oil” contains enough raw energy to power your house for 9 years.
“Based on advancing technology, a single barrel’s worth could soon be capable of unleashing more than enough energy to power 20,000 homes for a decade.”
“The Department of Energy already ponied up $68 million in federal funding to enhance ‘Brandt Oil’ applications across the country.
“At the state level, governors from Colorado, Utah, New York, California, Nevada and Wyoming are collaborating with one goal in mind…
“To install ‘Brandt Oil’ service stations along 5,000 miles of interstate highways, reports the Denver Post.
That Denver Post article is here, if you’re curious… and the ad also quotes several other articles… one of them about Shell buying a “brandt oil” company, which make it clear that yes, this is all about electric car charging stations.
So if electric car charging stations are a key “Brandt Oil” application, what the heck is “Brandt Oil” itself?
Apparently it’s exciting enough that Saudi Arabia is also getting on board…
“It’s only a matter of time before Saudi Aramco—the state’s national oil company—begins to embrace the shift as well…
“So where does that leave OPEC?
“OPEC countries don’t own a single drop of this new super fuel. This cartel is set to face total isolation in a “Brandt Oil” world.”
Huh? What’s the story here? What are they actually talking about?
I’ll give you a hint… a Swedish chemist named George Brandt was the first person to discover and isolate cobalt… almost 300 years ago, way back when it was still controversial that he had given up on alchemy and the dream of turning stuff into gold.
So yes, “Brandt Oil” must be cobalt… a relatively rare metal that is used, among other things, as a cathode in lithium-ion batteries, mostly to make them safer (controlling oxygen production, which is a fire hazard) and more durable while degrading relatively slowly.
There are lots of different battery chemistries, and plenty of materials science work is being done to make it possible to use something other than cobalt (or to use less cobalt) in vehicle batteries, but breakthroughs appear to be fairly slow in this space. If you want a fairly plain-language explanation of why cobalt is important in a lithium ion battery, I found this one pretty useful.
Batteries are not fuel, of course — they’re a storage mechanism. I guess you could say that gasoline is a storage mechanism, too, in that the potential energy is stored underground in hydrocarbons and is released when those hydrocarbons are burned in a combustion engine, but in practice it’s a consumable fuel. Batteries still need to be fed with energy, so there’s still also some energy production that needs to take place along with this “Brandt Oil”, even beyond the energy consumed in mining the lithium and cobalt and graphite and building the batteries… it might come from windmills, I suppose, or from nuclear power plants or solar panels, but most if it still comes from burning coal or natural gas.
But anyway, we know that — Cobalt is not a miracle fuel, but it is an essential component in modern rechargeable batteries, and (arguably) will remain so for a long time… and it’s in relatively short supply. Most cobalt comes from nickel and copper mines, so if nickel or copper see low prices the production of cobalt also slumps, and almost 2/3 of the current global cobalt supply comes from one of the countries that most multinational companies don’t particularly want to be associated with, at least in the public eye: The Democratic Republic of the Congo (DRC).
So that’s the situation, just to catch you up — most electric vehicle forecasters believe that we need a much larger supply of cobalt than is currently being mined, and a lot of production comes from a place that brings to mind the “conflict diamonds” of Angola a decade or two ago.
Let’s get back to the ad and see how it is we’re supposed to get rich from this “Brandt Oil” ….
“… while we have an estimated 1 million-tonne reserve of this raw super fuel in the U.S., most Americans have no idea it exists.
“It’s been nearly half a century since we last made any attempts to drill for ‘Brandt Oil.’
“Today, as we make the switch to ‘Brandt Oil’, the U.S. must import its supplies for now…about 12,000 tons a year…
“…Most of it comes from deposits in China, Africa, Russia and Norway, according to a report from the MIT Review.”
That MIT Review article was from 2011, by the way — not long after the previous price surge for the metal… so sometimes the timing of these things is not quite so precise as newsletter storytellers would have us believe. Forecasts for electric car demand (and cobalt demand) are not gospel, they’re guesses based on a variety of variables… but you know that, let’s get back to the ad…
Ready for another crazy promise? Here you go:
“As you’ve seen, President Trump’s executive order is deadline-specific (180 days). Geologists are moving in to put a “Big Fat X” on our reserve maps to begin drilling ASAP.
“Two things will happen…
“One, this presidential move will grant America clean-energy independence…
“Two, early investors who get in on the right side of this energy shift will become the new oil barons.”
We also get some of the “you need to get in with the smart money” talk about billionaires buying Brandt Oil…
“Billionaire Richard Branson announced his intention to put millions into cars powered by “Brandt Oil” technology.
“Another billionaire, George Soros, recently saw his investment firm dump $35 million into a “Brandt Oil” related ve”nture.
“But that’s nothing compared to Russian billionaire Vladimir Iorich, who plowed $150 million into “Brandt Oil” and other related resources
“Some are even cashing in…
“Warren Buffett’s investment firm parlayed a $230 million stake into $1.6 billion from one “Brandt Oil” related investment.
“Wall Street billionaire, Ron Baron, who has over $27 billion under management recently boasted on CNBC, “We’re going to make 20 times our money because the opportunity is so enormous.”
You can see the whole ad here if you like, I’ve left out some of the story in the interest of brevity (the ad transcript, printed out, is 36 pages long — even in the age of Twitter, long stories apparently work well for salesmen).
And he mentions a few little miners that surged during the initial price spike in cobalt into 2017, like Katanga Mining, so that gives us some indication of where he’s headed… I’m betting we’re about to be teased about a little cobalt miner or explorer.
No takers on that bet? OK, more clues…
“I’ve found a potentially very lucrative way for you to get rich from the full roll out of “Brandt Oil”…
“One Tiny Company Controls America’s
“Only ‘Brandt Oil’ Deposit
“Trump’s mandate has explorers searching North America for more deposits… but they have one for now… and it’s in the hands of this tiny resource company…
“This company is so incredibly small, if it grew 500-fold, it still wouldn’t be half the size of Exxon.
“And get this: it’s sitting on a deposit that’s potentially worth 7-times the value of the entire company (as measured by the stock market)….
“…this company’s find is a real bonanza. It has come at the perfect time, and it’s in a sweet spot to basically “name its price” for its ‘Brandt Oil.’
“It’s like pulling winning lottery tickets out of the ground…
“That’s why it’s critical you grab a stake while you can still get in under $2 a share….
“… market cap around $180 million….”
OK, so, umm… I win the bet, and we know who this is. There is only one US cobalt mine being built right now, and it’s been teased by pretty much all the resource newsletters at one point or another, so I guess it’s time for Dave Forest and the Casey folks to get on board. This is… eCobalt Solutions (ECS.TO in Canada, ECSIF OTC in the US).
What else are we told about this company? It can produce what seems like a lot, and it will be producing soon…
“The value of this deposit at $1.03 billion alone is quite telling…
“Bearing 28.8 million pounds (13,063 tons) of raw ‘Brandt Oil’, this company could supply the market with 2.4 million pounds of this fuel every year for 12 years.
“That’s enough raw energy to power every major U.S. city for over a decade.”
Cobalt is not, of course, “raw energy.” It doesn’t power anything by itself. It’s important, and the price has risen dramatically, but this is not a miracle that you’re pulling out of the ground to supply power for every major city and create a global utopia. At least, not by itself, and not very quickly.
And, of course, the value of cobalt in the ground is far different than the value of cobalt that has been dug up and refined. That $1 billion “value” is basically saying each pound of underground cobalt they’ve identified is worth about $35… which is close to the recent price of cobalt (it’s around $28/lb right now, it got a bit above $40 at the recent peak — and above $50 the last time it peaked, a decade ago).
So what’s the story with eCobalt Solutions? It was indeed a $2 stock not long ago… and I owned it a while back as well… but like the other relatively high-profile, near-term, non-Congolese cobalt miner Clean TeQ (which I currently own), its stock price has been going just about straight down this year as cobalt price hype drifted into Elon Musk’s “maybe we’ll be able to stop using cobalt entirely” talk earlier this year, and as the dreams of huge deposits were replaced with the cold reality of having to finance and build a mine, which is always (OK, 95% of the time) more expensive than planned and takes longer than expected.
The story of an exciting mining stock that might supply a scarce resource is often far more alluring than the reality of building one of these nasty, dirty, expensive and complicated projects.
But still, the promise remains and we remain perennially tempted — what other industry can take an ordinary looking plot of land and turn it into riches? And the demand remains strong, and the story for near-term cobalt miners seems like it’s mostly still intact — battery makers are trying to use less and less cobalt, but they don’t seem able to get rid of it entirely in their designs, at least not for situations like electric vehicles where safety (and not exploding) is a huge concern, and the majority of cobalt, both in production and potentially available, still sits in the DRC, being dug up in some cases by child labor and near-slaves, which the world goes through cycles of abhorring.
So what’s going to happen? I have no idea, you’ll have to make your own judgement call on when these cobalt names have gotten cheap enough that you can tolerate the “it’s more expensive than we thought” reports, the delays in finalizing financing and off-take agreements, and the uncertainty over how long this price spike in cobalt will last… or whether it will take off higher again. If you want more of the optimistic take on this, you need go no further than eCobalt’s latest investor presentation.
I’ve been quite wrong about the timing of cobalt investments, since I still own Clean TeQ shares, but I do still think the big picture indicates that new cobalt producers in the next few years should do well. I thought that when the prices of these stocks were twice the current levels, too, however, so take my assessment with a grain of salt.
And if you’d like to share your thoughts or disagree with me, by all means, let your words fly with a comment below. Thanks for reading!
P.S. Yes, Forest teased two other “Brandt Oil” Opportunities in his ad, too … I’m on a plane right now with a slow connection, so I’ll look into those for you next time around.